1. EVAL 6970: Cost Analysis for Evaluation Dr. Chris L. S. Coryn Nick Saxton Fall 2014

2. Agenda The concept and measurement of costs – The concept of costs Inadequacy of budgets for cost analysis – The ingredients method Identifying ingredients Familiarity with the interventions – Specification of ingredients Personnel Facilities Equipment and materials Other inputs Required client inputs General considerations in listing ingredients – Sources of ingredients information Activity

3. The concept of costs

4. Costs, as defined by the book’s authors are… – “…the value of all the resources that it [an intervention or program] utilizes had they been assigned their most valuable alternative.” – Alternatively, costs can be defined as “…the expenditure that we must make to purchase a particular good or service…” – Both are related to “opportunity costs” (extremely important…) What could have been accomplished with alternatives

5. In cost analysis, ‘resources’ are ‘valued’ and then used to determine whether decisions/actions taken were gained or lost in terms of costs (actual and potential) This logic/reasoning then leads to the “ingredients” model – In general ‘ingredients’ are the components necessary for executing a ‘recipe’ (i.e., cooking something) – Here, they ‘ingredients’ are used to define the elements included in a cost analysis

6. Inadequacy of budgets for cost analysis Simply using intervention or program budgets for cost analysis studies is problematic – Most budgets do not include all ‘costs’ – Some expenditures listed in budgets may be ‘covered’ in other budgets – Budgets may over-estimate certain types of costs and underestimate others – Budgets often do not ‘isolate’ the costs associated with particular interventions or programs – Most budgets consist of ‘planned’ rather than ‘actual’ expenditures

7. The ingredients method

8. Every intervention or program includes ‘ingredients’ that have associated costs and value (i.e., outcomes) This allows determining both total costs and costs per unit of effectiveness, benefit, or utility

9. Identifying ingredients Identify ‘all’ resources required to implement an intervention or program and obtain desirable outcomes/effects must be included These include, among others, ‘voluntary’ and ‘in-kind’ resources In general, consider only costs directly associated with the intervention or program…not other costs that are incurred under the auspices of ‘business as normal’

10. Familiarity with the interventions All ‘alternatives’ must be fully understood and described This includes all associated costs for each alternative (both monetary and non-monetary) ‘No’ evaluation—whether a cost analysis or otherwise—should ever be conducted without in-depth understanding of the intervention or program and its alternatives

11. Specification of ingredients

12. At this point, there is no need to enumerate the ‘costs’ associated with any of the ‘ingredients’ This will come later and requires placing valid, acceptable ‘values’ on the various ‘ingredients’ enumerated

13. Personnel For each considered alternative – Include ‘all’ forms of personnel – Also to include their ‘roles,’ ‘qualifications,’ and ‘time’

14. Facilities All ‘physical’ space required for the intervention or program Includes all information pertaining to space ‘dimensions’ and ‘characteristics’ that influence the ‘value’ of the spaces

15. Equipment and materials To include any and all ‘furnishings,’ ‘instructional equipment,’ and ‘materials’ Also includes those equipment and materials shared with other activities, interventions, or programs

16. Other inputs Any ‘ingredients’ that do not fall into the prior categories Include a statement of the purpose of these ingredients

17. Required client inputs ‘Ingredients’ required of those directly or indirectly participating in an intervention or program

18. General considerations in listing ingredients Enumerate ‘ingredients’ in sufficient detail so that their ‘cost values’ can be reasonably estimated Attention should be given to reducing errors to the extent possible

19. Sources of ingredients information

20. Primary sources include, but are not limited to: 1.Review of intervention or program documents 2.Discussion with individuals involved in the intervention or program 3.Direct observation of the intervention or program Other relevant methods should be used as necessary

21. Activity

22. In small groups of 2-3, identify what you believe are the primary ‘ingredients’ required for the Western Michigan University (WMU) Interdisciplinary Ph.D. in Evaluation (IDPE) program – If you require additional information, please ask the instructor or teaching assistant ‘Guesstimate’ the average annual costs for each of the ‘ingredients’ “Guesstimate’ the total average annual cost of the program